Suing hotels, restaurants, and supermarkets—trolls have won Congress' attention.

The first comprehensive anti-patent troll bill was introduced last week, and yesterday it debuted to a mostly receptive hearing in the House Judiciary Committee. But lawmakers were divided on a part of the bill important to some would-be patent reformers: establishing a patent office review system for "covered business method" patents.

Other parts of the bill would create more transparency in patent ownership, make it easier for companies to recover legal fees after winning a patent case, and shift rules around discovery and disclosure during litigation. The bill would also allow suits against customers who are users of a technology to be stayed when the manufacturer gets involved.

House Judiciary Chairman Bob Goodlatte (R-VA) introduced the bill by describing "abusive patent litigation" as a "drag on the economy" and calling out several of the most notorious examples of patent trolling in the past few years. Lodsys, a patent-holder that has gone after iOS developers, was called out by name.

"These suits target settlements at just under what it will cost for litigation," said Goodlatte. Shell companies are asking for payouts based on common practices like "sending a photo copy to e-mail, aggregating news articles, offering free Wi-Fi in your shop, or having a shopping cart on your website," noted Goodlatte. "The patent system was never intended to be a playground for frivolous litigation."

Next to speak was the ranking Democratic committee member, Rep. John Conyers (D-MI). While he agreed action was required, "our first rule should be to make sure we do no harm to our patent system," said Conyers.

He wasn't sure they needed to consider fee-shifting, for instance, when the Supreme Court is due to hear a pair of cases involving fee-shifting in patent cases. Nor did Conyers favor expanding the "covered business method" or CBM review program.

Expanding the so-called CBM program would have a big effect, because it would allow defendants to challenge many patents for around $100,000, instead of spending the $1 million or more typically required to fight a patent in federal court.

The current CBM program is a ten-year trial program that only applies to patents issued after the America Invents Act, passed in 2011, took effect. That means that most of the business-related patents reformers consider abusive can't be challenged under the program as it currently stands.

While some aspects of the bill have broad support in the tech industry, companies are divided about an expanded CBM. Many Internet companies support an expanded CBM review program, as do "Main Street"-type companies like supermarkets and restaurants, which are new but influential components of the anti-patent troll coalition. However, there's also a big coalition of businesses that opposes the CBM program—including some more established tech companies with more patents, like Microsoft, Adobe, Qualcomm, and Xerox.

The four witnesses who spoke were Krish Gupta, deputy GC at EMC Corp.; Kevin Kramer, head IP lawyer at Yahoo; David Kappos, who was the head of the US Patent and Trademark Office until recently and now is a lawyer in private practice; and Robert Armitage, former GC at pharmaceutical giant Eli Lilly.

Of the three witnesses, only Kramer supported expanding the CBM program. Kappos was vocal in his concern that the program should not be expanded from its focus on "financial service" patents to encompassing software patents.

"Let it settle in further," suggested Kappos. "Extension of that section to software innovations should be avoided. The US is home to a software industry that dazzles the world."

Troll overreach: Don’t mess with the burger joint

While there is some disagreement and confusion as to what changes are appropriate, now that more lawmakers are weighing in on the issue, it is clear that patent trolls are in for some kind of pushback. They have reached too far, demanded money from too many small businesses in too many cities. As an EFF attorney noted last week, the trolls have done much of the reformers' hardest work for them.

"In my area, local credit unions were the subject of a lawsuit from the patent assertion entities, just because they had features on their websites that have to do with online banking features," said Rep. Judy Chu (D-CA). "They had to make a decision between reducing staff and proceeding with a lawsuit. Finally they gave up and settled with the patent trolls."

The overreach was palpable and has made an impression on politicians. Rep. Brent Farenthold (R-TX) was incredulous that Whataburger, the Texas-based chain of hamburger joints, had been targeted by a patent suit.

"They make hamburgers!" sputtered Farenthold. "They don't play in the intellectual property game... You know there's a problem when I can't get Wi-Fi and the prices at my grocery store are going up because they're tagged by frivolous lawsuits."

Rep. Tom Marino (R-PA) named names, describing the patent threat letters his constituents had handed to him. Marino cited a letter from Farney Daniels, the Texas law firm pushing ahead with the now-notorious scanner patents; another letter from the firm of John Desmarais, who made waves in the legal world by leaving his corporate law firm to work for Intellectual Ventures and other patent plaintiffs; and a letter from Innovative Wireless Solutions LLC, yet another shell company wielding patents it says entitle it to payments from users of Wi-Fi.

"These are typical letters," said Marino. "They fail to state a claim. One has a little diagram. Apparently I have some problems in my own house, because my computer, and my wife's, and my kid's, are all linked together. That is how ridiculous these letters are. Particularly in my district, people are scared to death when they get something like this, because they don't know what's going on... why should criminal charges not be filed against someone for doing this?"

46 Reader Comments

I hope that this ends up making a difference. I seriously doubt that the reason that the US software industry is world leading is that they are allowed to patent anything and everything. I bet it has more to do with the American drive to succeed and be the best.

How about a specialized national court that is available to all patent suit defendants (any defendant could move for removal to this court, and it would be granted in virtually every case) to be the "court of first impression" and featuring streamlined discovery and adjudication of such patent suits?

I dont see why we shouldn't have a broad CBM program, bring patent challenge costs down to something reasonable like 5-15k and you will probably start seeing bad patents drop like flies. Patents should only be valuable if you have a unique assertion without any prior art anyways.

I dont see why we shouldn't have a broad CBM program, bring patent challenge costs down to something reasonable like 5-15k and you will probably start seeing bad patents drop like flies. Patents should only be valuable if you have a unique assertion without any prior art anyways.

The problem is that the value of a patent can't really be quantified in any useful way without resorting to interpretations of law. If patents could be plotted and modeled according to quantifiable values, this would be an engineering problem rather than a legal one. As it is, the bounty goes to the more effective arguer, not necessarily to the better inventor.

Next to speak was the ranking Democratic committee member, Rep. John Conyers (D-MI). While he agreed action was required, "our first rule should be to make sure we do no harm to our patent system," said Conyers.

No, that's absolutely wrong. The first rule should be to make sure we do no harm to our economy. The patent system is causing harm, it needs to be changed in dramatic ways. If the first priority is to protect its status quo, they have already failed.

What about significantly lower the damage of patents holders can obtain if their patents is neither used or licensed?

That makes no sense. If the court finds that patented technologys is not being used, the defendant did not infringe and no damage will be awarded. If the patented technology is being used without being licensed, that's a violation of the law and the owner of the patent is entitled to compensation.

What about significantly lower the damage of patents holders can obtain if their patents is neither used or licensed?

That makes no sense. If the court finds that patented technologys is not being used, the defendant did not infringe and no damage will be awarded. If the patented technology is being used without being licensed, that's a violation of the law and the owner of the patent is entitled to compensation.

Zzzz... Obviously I am talking about not being used or licensed by the patent holder. Thus patent troll....

Next to speak was the ranking Democratic committee member, Rep. John Conyers (D-MI). While he agreed action was required, "our first rule should be to make sure we do no harm to our patent system," said Conyers.

No, that's absolutely wrong. The first rule should be to make sure we do no harm to our economy. The patent system is causing harm, it needs to be changed in dramatic ways. If the first priority is to protect its status quo, they have already failed.

The system is causing harm but it's not clear the LAW is causing harm. The system is not working right mainly because the Patent Office doesn't understand the technology they are assessing for novelty and obviousness -- and hasn't for at least 20 years. If they did, they would grant a lot fewer patents and wouldn't allow such broad claims.

What about significantly lower the damage of patents holders can obtain if their patents is neither used or licensed?

That makes no sense. If the court finds that patented technologys is not being used, the defendant did not infringe and no damage will be awarded. If the patented technology is being used without being licensed, that's a violation of the law and the owner of the patent is entitled to compensation.

Zzzz... Obviously I am talking about not being used or licensed by the patent holder. Thus patent troll....

You know, that could solve completely isolated issues you wouldnt expect to be related. Take Google for example. They send their profits offshore to a related entity, who technically owns the rights to their search algorithms. The profit shifting is a completely different issue of course, but figure that the offshore company doesnt use the IP, but leases them to Google proper, and you have the situation you describe.

So someone copies their method, Google cant sue, unless they take ownership back of the rights, and hence force their income to stay where its earned. I wonder what other companies fall into the same category...

The answer is pretty simple1. 100% Transparency, if you want to sue some one. The owner and person legally responsible of the patents have to show their face. If they don't case is thrown out and their patents invalidated. That alone would stop majority of patent cases dead in their tracks. Making patent lawsuits much more difficult in general.

2. If you do not manufacture the item you invent. You only keep exclusive rights to the patent for a maximum of 5 years. With no possibility of Extension. After which your patent and all ownership goes into general public license. - This will solve issues of people simply sitting on old patents

3. Patents cannot be sold. - End. The original owner can stay within the company, license it. If he dies, it goes into general public license

Next to speak was the ranking Democratic committee member, Rep. John Conyers (D-MI). While he agreed action was required, "our first rule should be to make sure we do no harm to our patent system," said Conyers.

No, that's absolutely wrong. The first rule should be to make sure we do no harm to our economy. The patent system is causing harm, it needs to be changed in dramatic ways. If the first priority is to protect its status quo, they have already failed.

The system is causing harm but it's not clear the LAW is causing harm. The system is not working right mainly because the Patent Office doesn't understand the technology they are assessing for novelty and obviousness -- and hasn't for at least 20 years. If they did, they would grant a lot fewer patents and wouldn't allow such broad claims.

You might be right. There is obviously a need to change the way patents are delivered. At least, it is necessary that the patent examiners can reject much much more patents. The second aspect is to lower the cost of challenging the patent.

But the fact that big corporates are trying to remove some power from the law is characteristic. The system is flawed not only because of patent trolls. It is flawed also because of overbroad underinnovative patents delivered to big players. The result is that they can sterilize competition from startups and smaller / more recent competitors.

I get why that changed it to "first to file," the patent office was inundated and patent research is complicated. The change that needs to happen is to allow showing a prior work (even if it wasn't by the respondent) to be used as a defense. It'd take a lot of the teeth out of the patent trolls suing for processes that people were already using when they filled the patent and, over enough iterations, it would help to find the actual original inventor and encourage companies using that process to actually recognize them.

Well, the big companies opposed to CBM expansion are not exactly good companies, in regards to patents.

Microsoft famously patent trolls their competitors. They make more money by trolling Android than by selling Windows Phone and Windows RT licenses.

Adobe patents every aspect of their software, making it difficult to make beautiful fonts unless Adobe donates it. Adobe is not entirely bad. Just somewhat bad.

Qualcomm makes a bunch of stuff, but they also patent a whole lot of vague ideas. Like, they've just filed an application for a patent for detecting whether you're running or in a car or whatever, so a phone could display different things. So, how does the patent help you make useful new technology? It doesn't.

Xerox has been famously bad at doing good things with the innovations from their labs. The Palm Graffiti thing was a real annoyance to me. They also have a whole lot of patents.

So, companies that have a lot of dubious patents and engage in patent trolling, those companies oppose making it easier to challenge the patents. What a big surprise. It would be disappointing if they prevail.

What about significantly lower the damage of patents holders can obtain if their patents is neither used or licensed?

That makes no sense. If the court finds that patented technologys is not being used, the defendant did not infringe and no damage will be awarded. If the patented technology is being used without being licensed, that's a violation of the law and the owner of the patent is entitled to compensation.

Zzzz... Obviously I am talking about not being used or licensed by the patent holder. Thus patent troll....

You know, that could solve completely isolated issues you wouldnt expect to be related. Take Google for example. They send their profits offshore to a related entity, who technically owns the rights to their search algorithms. The profit shifting is a completely different issue of course, but figure that the offshore company doesnt use the IP, but leases them to Google proper, and you have the situation you describe.

So someone copies their method, Google cant sue, unless they take ownership back of the rights, and hence force their income to stay where its earned. I wonder what other companies fall into the same category...

Wouldn't leasing be a form of licensing?And couldn't Google (on contract) be their legal representatives in USA?

I don't know much about the law here but that to me effectively "covers the bases" so to say. Even if leasing by itself wouldn't count they would just rework it into a licensing deal that would count towards these changes. Google (and other companies with similar practices) will just adjust to stay within the legal protection offered.

The companies that really will be effected are those who just shoot out or buy up patents then sit on them doing nothing and waiting until the patented "technology" is successfully implemented by someone else, and only then start with the litigations.

"However, there's also a big coalition of businesses that opposes the CBM program—including some more established tech companies with more patents, like Microsoft, Adobe, Qualcomm, and Xerox."

That right there is the best argument possible for expanding it. These are the trolls that ARE operating entities, and they want protection from others but business as usual for themselves. Expect additional sliminess from these types, in the form of lobbying for restricting the new changes to non-operating entities.

"Of the three witnesses, only Kramer supported expanding the CBM program. Kappos was vocal in his concern that the program should not be expanded from its focus on 'financial service' patents to encompassing software patents."

There's your evil, right there in plain sight. The CBM changes (and they better apply retroactively, too) are CRITICAL to restoring any sort of fairness to the software patent market. The software patent market is the MOST screwed up part of the whole thing, and this bastard wants to exclude it?

Next to speak was the ranking Democratic committee member, Rep. John Conyers (D-MI). While he agreed action was required, "our first rule should be to make sure we do no harm to our patent system," said Conyers.

No, that's absolutely wrong. The first rule should be to make sure we do no harm to our economy. The patent system is causing harm, it needs to be changed in dramatic ways. If the first priority is to protect its status quo, they have already failed.

I get why that changed it to "first to file," the patent office was inundated and patent research is complicated. The change that needs to happen is to allow showing a prior work (even if it wasn't by the respondent) to be used as a defense. It'd take a lot of the teeth out of the patent trolls suing for processes that people were already using when they filled the patent and, over enough iterations, it would help to find the actual original inventor and encourage companies using that process to actually recognize them.

The Patent Office was already overwhelmed before FTF rules came to America.

there should be no software and business methods patents !!!!software should copyrighted.patenting business methods is like patenting walking.

My 2 cents

Software IS copyrighted. The trouble is if you invent a new way of solving a problemw with software. You write it in C#. Anybody can take your code, figure out its method, translate it to another language if they want to, change the variable names, refactor it a little bit and now it's unrecognizable even though it's functionally identical to the original work. That doesn't violate copyright.

But it's like making a rachet wrench out of a different grade of steel with a different colored handle, casting a different name into the handle.

Your position would result in zero protection for truly inventive software methods that significantly advance the state of the art. Such inventions exist, but maybe you can't see them because they're buried in the sea of shit that is the body of software patents.

I hope that this ends up making a difference. I seriously doubt that the reason that the US software industry is world leading is that they are allowed to patent anything and everything. I bet it has more to do with the American drive to succeed and be the best.

To be fair, it probably has more to do with Indian and Chinese drive to succeed, traveling over to the states to get a piece of that old American family investment money. American education in math, science, and technology doesn't seem to follow our software and engineering, so it stands to reason we probably import a large portion of our success, which in and of itself is fine, but erodes the myth of American exceptionalism.

The bill would also allow suits against customers who are end-users of a technology to be stayed when the manufacturer gets involved.

I don't think this goes far enough. If an end-user is using a commercial, off the shelf product, without modification, they should be exempt. I can't think of any reason that end-users should be on the hook, other than the patent holder wanting more money.

there should be no software and business methods patents !!!!software should copyrighted.patenting business methods is like patenting walking.

My 2 cents

Software IS copyrighted. The trouble is if you invent a new way of solving a problemw with software. You write it in C#. Anybody can take your code, figure out its method, translate it to another language if they want to, change the variable names, refactor it a little bit and now it's unrecognizable even though it's functionally identical to the original work. That doesn't violate copyright.

But it's like making a rachet wrench out of a different grade of steel with a different colored handle, casting a different name into the handle.

Your position would result in zero protection for truly inventive software methods that significantly advance the state of the art. Such inventions exist, but maybe you can't see them because they're buried in the sea of shit that is the body of software patents.

While true, I think that the problems caused by the 99.9% of junk sw patents may need to make the few worthy ones collateral damage. Most sw patents are not JPEG or MP3, they are bullshit UI patents on bouncing lists or swipe-to-unlock.

Making UI patents invalid (e.g. you can't patent what you can see of the feature in use) would solve a ton of the lawsuits out in the tech world today. It would return the patent to IMPLEMENTATION novelty not just "oohhh, I thought of something pretty".

The bill would also allow suits against customers who are end-users of a technology to be stayed when the manufacturer gets involved.

I don't think this goes far enough. If an end-user is using a commercial, off the shelf product, without modification, they should be exempt. I can't think of any reason that end-users should be on the hook, other than the patent holder wanting more money.

I agree, although staying a suit against an end user does allow time for the manufacturer to step in and resolve the case in such a way that the end users's case would be dismissed (perhaps even with prejudice). It's better than merely delaying the end user's case, since it allows for a kind of short circuit.

But I would share your interest in some kind of automatic indemnity for end users of products that incorporate patented technology. It seems absurd that a hapless consumer could ever be liable in a patent dispute at all, having merely purchased a product or used a service.

Indemnifying end users would confine trolls to much larger adversaries much more capable of squashing trolls, and might well end the bulk if not all of this nonsense.

The bill would also allow suits against customers who are end-users of a technology to be stayed when the manufacturer gets involved.

I don't think this goes far enough. If an end-user is using a commercial, off the shelf product, without modification, they should be exempt. I can't think of any reason that end-users should be on the hook, other than the patent holder wanting more money.

I agree, although staying a suit against an end user does allow time for the manufacturer to step in and resolve the case in such a way that the end users's case would be dismissed (perhaps even with prejudice). It's better than merely delaying the end user's case, since it allows for a kind of short circuit.

But I would share your interest in some kind of automatic indemnity for end users of products that incorporate patented technology. It seems absurd that a hapless consumer could ever be liable in a patent dispute at all, having merely purchased a product or used a service.

Indemnifying end users would confine trolls to much larger adversaries much more capable of squashing trolls, and might well end the bulk if not all of this nonsense.

I'd say that patent suits should be limited to the original producer or importer of the product or service in question, so as to "cover" as many as possible.

The only exception I can see to that is when a manufacturer sells manufacturing capacity rather then the product itself (a.k.a custom jobs).

Maybe trolling is just a symptom. Maybe the real problem is that money is a judicial weapon. Maybe a justice system that doles out more justice to the wealthy isn't such a great idea. I dunno, I live in a socialist country anyway.

Rep. John Conyers (D-MI). "our first rule should be to make sure we do no harm to our patent system," said Conyers.

Hey conyers you F##King IDIOT!!!! The patent system is broken: utterly and profoundly. The LEGAL ARSEHOLES that run this country has crafted a piece of egregious legislation that is SOOO hellishly complicated no one can fully understand it or use it except the ARSEHOLES that make the most money off it.... THE EFFING LAWYERS!!! I liken many of these pricks to be the lowest bottom-feeding bunch of womens reproductive organs around, far below even car salesmen. Half or more of the barstids charged with our best interests (congress / senate) are lawyers and will do little to interupt this cash cow, not because of corporate interests burt because of the money to be made by the legal vermin that scurry around like roaches looking for ways to exploit the system and to make simply make money from people doing real honest and innovative things.

The bill would also allow suits against customers who are end-users of a technology to be stayed when the manufacturer gets involved.

I don't think this goes far enough. If an end-user is using a commercial, off the shelf product, without modification, they should be exempt. I can't think of any reason that end-users should be on the hook, other than the patent holder wanting more money.

I agree, although staying a suit against an end user does allow time for the manufacturer to step in and resolve the case in such a way that the end users's case would be dismissed (perhaps even with prejudice). It's better than merely delaying the end user's case, since it allows for a kind of short circuit.

But I would share your interest in some kind of automatic indemnity for end users of products that incorporate patented technology. It seems absurd that a hapless consumer could ever be liable in a patent dispute at all, having merely purchased a product or used a service.

Indemnifying end users would confine trolls to much larger adversaries much more capable of squashing trolls, and might well end the bulk if not all of this nonsense.

Any stay or indemnification legislation is going to have to be pretty firm in forcing a troll-plaintiff to deal with the manufacturer / service provider, because otherwise the end users will still be subject to the whims of judges like the one who disallowed Apple from intervening in the Lodsys case.

The problem is that the value of a patent can't really be quantified in any useful way without resorting to interpretations of law.

How about using the same valuation the trolls themselves use? If they paid $50K for a patent, the lifetime licensing revenues for that can be presumed to be some low integer multiple of that number, say 4-5X. If they send a settlement letter for $3000, then that's the cap on damages they can ask even if the case goes to trial.